Colfax has committed to separating its medical device and fabrication technology businesses into two independent public companies.
The split will create a medtech company with a portfolio of orthopaedic devices forecast to generate sales of around $1.4 billion this year. Colfax expects to complete the split by the first quarter of next year.
Colfax built the portfolio through its $3.15 billion takeover of DJO Global and subsequent deals for Stryker's STAR total ankle replacement product, LiteCure and Trilliant Surgical. Splitting the businesses is intended to facilitate more M&A.
Colfax was an industrial technology conglomerate targeting the welding and air and gas handling sectors before it made its $3.15 billion move for DJO late in 2018. The deal moved Colfax into a new industry, albeit one that its founders and CEO had some experience from their time working at Danaher. Colfax then expanded DJO through deals for ankle replacement products, therapeutic laser technology and orthopaedic implants.
Having built up the orthopaedic business, Colfax now plans to separate the device division from its legacy operation. The resulting medtech company, which will have a new, as-yet-undisclosed name, will provide surgical implants, injury prevention products and recovery devices from sites in Delaware and Texas.
Matt Trerotola, the current CEO of Colfax and former group executive for life sciences at Danaher, will run the new medtech company. Brady Shirley, the CEO of DJO, will serve as chief operating officer. Colfax CFO Chris Hix will retain his current position at the medtech spinoff.
Colfax said separating the businesses will enable the medtech organization "to continue to expand its share in high-growth, high-margin served and adjacent markets through strategic M&A and R&D investments."
Talking to investors last month, Trerotola said Colfax's interest in medtech is "in part due to the many opportunities for investment in this attractive fragmented space." The pandemic caused sales to fall but Colfax struck deals amid the disruption. Colfax has remained interested in M&A after the flurry of acquisitions, with Trerotola expressing a desire to strike small to medium-sized deals for assets that improve growth and gross margins.
The M&A strategy is part of Colfax's plans to add to the 4% to 5% growth it expects to get out of its existing portfolio and turn the business into a high-single-digit grower. Colfax expects above-normal growth through parts of 2021 and 2022 as the pandemic abates and elective procedures get back up to speed.